• Discussed with SAC: July 2001
• Added to IASB Agenda (jointly with FASB): October 2004
• Discussed at January 2005 IASB Meeting – Discussion of Project Plan
• Discussed at February 2005 IASB Meeting – Discussion of Project Plan
• Discussed at April 2005 Joint IASB-FASB Meeting
• Discussed at May 2005 IASB Meeting – Discussion of Phase A
• Discussed at June 2005 IASB Meeting – Discussion of Phase A
• Discussed at July 2005 IASB Meeting – Discussion of Phase A
• Discussed at October 2005 IASB Meeting – Discussion of Phase A
• Discussed at October 2005 Joint IASB-FASB Meeting
• Discussed at December 2005 IASB Meeting – Discussion of Phase A
• Discussed at February 2006 IASB Meeting – Discussion of Phase B
• Discussed at March 2006 IASB Meeting – Discussion of Phase D
• Discussed at April 2006 IASB Meeting – Discussion of Phase B and Phase D
• Discussed at April 2006 Joint IASB-FASB Meeting – Discussion of Phase B
• Discussed at June 2006 IASB Meeting – Discussion of Phase B
• Discussion Paper on Objectives and Qualitative Characteristics published 6 July 2006 – part of Phase A
• Discussed at July 2006 IASB Meeting – Discussion of Phase B
• Discussed at September 2006 IASB Meeting – Discussion of Phase B and Phase D
• Discussed at November 2006 IASB Meeting – Discussion of Phase B
• Discussed at December 2006 IASB Meeting – Discussion of Phase D
• Discussed at February 2007 IASB Meeting – Discussion of Phase A and Phase B
• Discussed at March 2007 IASB Meeting – Discussion of Phase C
• Discussed at April 2007 IASB Meeting – Discussion of Phase A and Phase G Applicability to Non-Profit and Public Sector
• Discussed at April 2007 Joint IASB-FASB Meeting – Discussion of Project Plan and Phase C
• Discussed at May 2007 IASB Meeting – Discussion of Phase D
• Discussed at June 2007 IASB Meeting – Discussion of Phase A
• Discussed at July 2007 IASB Meeting – Discussion of Phase B
• Discussed at September 2007 IASB Meeting – Discussion of Phase A and Phase D
• Discussed at October 2007 IASB Meeting – Discussion of Phase A and Phase B
• Discussed at November 2007 IASB Meeting – Discussion of Phase C
• Discussed at December 2007 IASB Meeting – Discussion of Phase A and Phase B
• Discussed at February 2008 IASB meeting – Discussion of Phase A and Phase D
• Discussed at April 2008 Joint IASB-FASB meeting – Discussion of Phase A and Phase D

Timetable

• Click for IASB Project Timetable

Background

At their joint meeting in October 2004, the IASB and the US FASB decided to add to their respective agendas a joint project to develop a common conceptual framework, based on and built on both the existing IASB Framework and the FASB Conceptual Framework, that both Boards would use as a basis for their accounting standards.

The two boards reached the following tentative decisions about the approach to the project:

• The project should initially focus on concepts applicable to business entities in the private sector. Later, the boards should consider the applicability of those concepts to other sectors, beginning with not-for-profit organizations in the private sector.
• The project should be divided into phases, with the initial focus being on achieving the convergence of the frameworks and improving particular aspects of the frameworks dealing with objectives, qualitative characteristics, elements, recognition, and measurement. Furthermore, as the frameworks converge and are improved, priority should be given to addressing issues that are likely to yield benefits to the boards in the short term, that is, cross-cutting issues that affect a number of their projects for new or revised standards.
• The converged framework should be in the form of a single document. It should include a summary and a basis for conclusions.

Project Is Being Conducted in Eight Phases

The Conceptual Framework project is being conducted in eight phases. We have organised our project notes on IAS Plus with a separate web page for each phase plus a page on the overall approach to the project (click below to go to the relevant page):

• Overall Approach to the Project – This Page
• Phase A: Objectives and Qualitative Characteristics
• Phase B: Elements and Recognition
• Phase C: Measurement
• Phase D: Reporting Entity
• Phase E: Presentation and Disclosure
• Phase F: Purpose and Status
• Phase G: Application to Not-for-profit Entities
• Phase H: Remaining Issues

Discussion at the Board's January 2005 Meeting – Initial Communications Document

The Board considered an 'initial communications document' on the joint conceptual framework project. This document is a staff paper which will highlight to interested parties the objective and intentions of this project. The target market for this paper is the parties who normally actively participate in the standard setting process by way of formal comment. The paper will be posted on the website and distributed to subscribers. The key points of the paper include a discussion of how principle based standards tie in to concepts, the difficulty of reaching joint conclusions when underlying concepts are different, and a discussion of the elements of the frameworks. The Board agreed the paper should acknowledge the intention to grab aspects of conceptual frameworks from other national standard setters in instances where those frameworks are found to be superior, and that national standard setters will be actively involved in this project.

The Board agreed that this document should be jointly issued as a staff paper, and agreed to provide drafting amendments out of session, and consider the re-drafted paper prior to issue. It was also agreed that a more high level document, targeted at the CFO level, would be prepared by a professional business writer, and common materials would be prepared for Board members to explain the project to such audiences. The Board noted that a detailed project plan for this project is currently being prepared, and indicated an intention to discuss this plan at the February meeting.

Discussion at the Board's February 2005 Meeting

The following project plan was discussed by the Board:

Concern was registered regarding the duration of this project, followed by suggestions that the Board should aim for a shorter project duration.

The staff indicated the reasons for the staggered approach and the anticipated duration of this project, highlighting the new territory that would be covered, resource constraints and the number of items already on the Board's agenda.

Suggestions for how to tackle the various phases of the project were discussed and noted. These included, addressing the 'elements' (for instance, the distinction between liabilities and equity) as part of phase A, and defining the 'reporting entity' earlier as this would be essential in dealing with the other issues that follow. The staff indicated that it may be appropriate to amend the current Framework on a piece-meal basis depending on the nature of the new provisions but this would be assessed on an on-going basis.

The Board reiterated that the drafting of the framework required a 'top down' approach to the high level conceptual issues as well as a 'bottom up' approach to the more detailed aspects of those concepts, therefore, the items currently on the Board's agenda would allow the Board to test or explore the issues in this project indirectly. It was also noted that this approach was not well understood by commentators who criticised the Board for developing Standards that appeared to contradict the current Framework.

It was noted that some of the issues in the project plan had been initiated and commenced by some national standard setters (for example, the Canadian research project on initial measurement) which the Board agreed should be considered.

The overall plan was accepted by the Board, subject to the above suggestions and the staff were asked to implement it as well as consult the FASB on whether they concurred.

The Board agreed to initiate the process of appointing a Working Group that would assist the staff with this project.

Discussion at the October 2005 Joint IASB-FASB Meeting - General Approach to the Project

The Boards considered a diagram illustrating the way in which the conceptual framework ought to operate. It was noted that at this stage, this is a guide for standard-setters to assist them in their decision making. Once it has been made operational for standard-setters it will be possible to develop something for preparers and users to assist them in assessing what process to follow where no specific accounting pronouncement addresses a situation. The process suggested was broadly as follows:

• Identify the phenomena relevant to the accounting issues.
• Select the most relevant phenomena.
• Assess whether the depiction is a sufficiently faithful representation.
• Assess whether the representation will result in sufficiently comparable financial reporting.
• Assess whether the representation will result in sufficiently understandable financial reporting.

The Boards noted that in going through this process there will be a number of decision loops that will take standard setters back to earlier stages in the process, and that all of the decisions are made with cost/benefit considerations in mind. A minority of Board members would prefer for this process not to be depicted pictorially; instead, they would explain it in a rich narrative. It was agreed that staff should continue to develop the narrative, and a final decision about including or excluding a pictorial representation will be made later.

The FASB noted that they are in the process of taking over the hierarchy under US GAAP, which was previously established by the AICPA. The FASB stated that changing the hierarchy so as to require the framework to be considered will be a significant change, and a number of parties are concerned that this will lead to 'over-imaginative' accounting practices.

The Boards considered a paper discussing whether objectives and qualitative characteristics should differ between different types of entities. In preparing the paper staff had considered a wide body of existing research into the topic. It was agreed that at this stage of the project there is no need to modify the qualitative characteristics or the objectives of financial reporting for particular types of entities.

The Board noted that they had received a letter from Ian Mackintosh, chairman of the UK ASB, representing the views of a number of national standard setters in relation to the appropriate accounting framework for not-for-profit entities. The Boards noted they are unable to take action on that letter at this time because of jurisdictional issues for both Boards, and the fact that consideration of these types of entity would slow down the development of the framework for business entities.

The Boards considered a draft section of the proposed conceptual framework in relation to the objectives of financial reporting, and a basis for conclusions to that section. The Boards were asked for general comments about the length and nature of the draft. The Boards praised the high quality of the draft. The Boards debated whether the use of a black letter/grey letter format was appropriate to distinguish the main principles from the supporting guidance. Many Board members were unsure as to the usefulness of such a distinction in a concepts document. It was agreed that the staff would draft the document without this distinction, but that on seeing the final document this decision may be revisited.

Staff informed the Boards that in the drafting process, a lot of useful information on the environmental context of financial reporting currently contained in the FASB Concepts Statements had been lost. They asked whether the Boards wished for an appendix on this to be developed. The Boards agreed that this was not necessary at this time but the decision might later be revisited.

It was noted that in the existing US GAAP framework, reporting financial performance is identified as the primary purpose of financial reporting. It was agreed that this should not be included in the revised conceptual frameworks. However, Board members clarified that they do not believe this is evidence of a 'balance sheet view' of financial reporting. Rather, they noted that true income should be a robust measure arising from the change of financial assets and liabilities.

The draft framework referred to the fact that 'standard-setting bodies are likely to be the major users of the framework', and the Boards were asked whether they would like to refer specifically to national standard setting bodies. The Boards agreed that they should not refer to national standard setters, nor to specific interpretive bodies. It was noted that the term 'major users' was inappropriate because under IFRS, the framework is part of the GAAP hierarchy and therefore preparers are also a major user. It was noted that this would continue to cause some awkwardness until such time as the framework is incorporated into the US GAAP hierarchy.

The Boards considered the project plans. They agreed that in November the respective Boards would discuss cost/benefit considerations and the qualitative characteristics. It was noted that the project falls neatly into two phases, the first covering the objectives and qualitative characteristics of financial reporting, and the second covering definitions of both the elements and the entity. It was suggested that the first phase should not be exposed as it is not a fundamental change, and should rather be posted on the respective websites as a 'milestone draft'. The Boards noted that after publication of such a draft significant changes might still occur as a result of subsequent discussion. After some discussion of the relative merits, the Boards asked staff to proceed on the basis that the first phase would be formally exposed when completed.

Discussion at the Joint IASB-FASB Meeting in April 2007 - Project Plan

Status report

The Boards discussed progress on the various phases in the Conceptual Framework project and addressed issued raised by the staff. The staff reported that there were six substantive projects and two 'tasks' – the latter being the determination of authoritative status and the 'unifying phase'. The next due process document expected is the Chapter on the Reporting Entity, for which a pre-ballot draft is expected in May 2007, sweep issues in June, and a final Discussion Paper in July 2007.

Work on the assets and liabilities chapter is taking longer than expected, and the Boards have still to complete their initial deliberations on the asset definition and have not yet considered that for liabilities.

Project processes

The staff discussed the constraints that it is currently experiencing and the possible approaches to relieving those constraints to enable better progress to be made.

The principal constraint is the availability of staff. At present the conceptual framework staff is at least two or three full-time equivalents short and suitable staff members are either committed to other projects or not available at all. Therefore, a choice must be made: either accept that progress will be made more slowly than planned or else get creative.

One staff suggestion generated a significant amount of controversy. There was a suggestion that it might be possible to combine certain phases or due process documents. Several IASB members commented that, for IASB constituents, this would not be acceptable. The IASB was already under considerable pressure to slow down on the conceptual framework project and to have more consultation on all steps. It would simply not be possible to eliminate a due process step (especially a due process document).

The suggestion that there should be better coordination between the conceptual framework team and related standards-level teams also generated comment. Board members acknowledged that work on standards-level projects would inform the conceptual framework team and vice versa. However, no one particularly wanted to see a standards-level project delayed significantly because the conceptual framework project was not complete. However, there was also the danger that a standards-level project might suggest an approach that was contrary to the current direction of the related conceptual framework project. Board members suggested that judicious use of Board advisors and regular meetings between project teams were ways of avoiding both pitfalls.

Ultimately, the Boards gave their support to the staff directors to assign staff and schedule the projects as they thought best. Recruitment would continue. In addition, it was expected that the business combinations team would shortly complete their work and be available for other assignments.

The Boards also discussed the next stage for Chapter 1 (Qualitative Characteristics and Objectives of financial reporting).

After some discussion, it was agreed that the Boards should proceed to an Exposure Draft as scheduled. This Chapter would also help forthcoming standards-level projects and was becoming critical to the future work programme of the Boards.

There was a short discussion of the consideration of not-for-profit reporting issues and the conceptual framework project. While it was agreed that the insights provided by not-for-profit entities were often very useful, the Boards did not have the luxury to examine such issues: it was under pressure to develop the framework in the context of profit-seeking entities.

Discussion at the April 2007 IASB Meeting

Applicability of the framework to not-for-profit and public sector entities

Some respondents criticised the Boards' plan to address not-for-profit and public sector entities toward the end of the conceptual framework project as there would be the risk that adequate consideration of not-for-profit and public sector issues would not be provided; or that amendments to the Framework established for profit-seeking entities necessary to fully reflect the needs of the not-for-profit and public sectors might be more difficult to accommodate.

The Board affirmed its decision to defer consideration of not-for-profit and public sector entity issues and continue to focus currently available resources on the first four phases of the project. No decisions were made regarding the starting point of deliberations for not-for-profit and public sector entities.

One Board member raised the concern that particularly in the governmental area there may be numerous issues that have never been contemplated before by the Board, for example, the accounting for potential stand-ready obligations of NATO member countries to defend certain other countries. Therefore, the Board should not promise to cover all issues related to public sector entities within this project.